It is not possible to accept the submission of the Revenue that once the AO comes to the conclusion that there is a breach of the mandate of Section 158BFA(1), then the penalty has to be mandatorily imposed. The terminology of section 158BFA makes it clear that the AO has a discretion in the matter of levy of penalty.

Writ petitions were filed challenging the constitutional validity of the provisions of Section 245HA of the Income Tax Act, 1961 under which the petitioners’ applications before the Settlement Commission are to be treated as having abated on account of failure of the Settlement Commission to pass orders under Section 245D(4) of the Act on or before 31.03.2008. In view of the fact that the Supreme Court was seized of an identical issue, the petitions were disposed of with the direction that the parties would abide by the decision of the Supreme Court and in the meanwhile the assessment proceedings would be stayed.

Where the department had not disputed that the expenditure was deductible in principle but was only disputing the year in which the deduction could be allowed HELD, castigating the department, that as the tax rates were the same in both years, the department should not fritter away its energies in raising questions as to the year of deductibility/taxability.

It is clear from the reading of Section 36 (1) (vii) and Circular No. 551 dated 23rd January, 1990 that if the assessee has written off the debt as bad debt, that would satisfy the purpose of the Section.